Profits and employment.

The volume of profits in an economy is a magnitude, which is out of sight of orthodox macroeconomic textbooks and effectively ignored by neoclassical macroeconomics. In contrast, Kalecki’s approach brings to the forefront the sources of profits and makes possible their further analysis. In a previous paper, the sources of profits and their impacts, as well as the inter-relations among them are examined one by one. The sustainability of the profits’ sources tends to have inevitable limits, which are discussed and elucidated. Given these limits, two phases in the operation of the sources may be distinguished, with a beneficial phase being transformed into a pathological one, as the limits are breached. Consequently, profits may be distinguished according to the source from which they flow, as well as the phase in which they arise. Taking into account both source and phase, a terminology is proposed to highlight the distinctive character of the different kinds of profits. The present paper briefly reviews this analysis and terminology and, based on this, goes on to consider the relationship between profits and employment. The concept of ‘wasted profits’ is first presented and developed. This is followed by an assessment of the alleged opposition between profits and employment. Finally, the employment effects that the different kinds of profits tend to bring forth, are examined and compared to each other on the basis of appropriate elasticities.